Friday, 14 June 2013 10:29

7 steps to raising Seed Investment for Africa focused Tech Startups - Step 6 & 7


6. SCORING an anchor and influential investor can

significantly boost your chances but be careful who this is? Refer to point 3. Accelerators and incubators act a lot for this a “stamp of approval” but also make it efficient for investors coming to visit a region in Africa. In Silicon Valley, getting vouched and having influential personalities such as Ron Conway or Dave McClure can get you a long way to closing your funding round. Angel-list again is another way to make this process more efficient, but it is no substitute for face to face interaction if you can get it. Sometimes you are better off preparing really well and scoring an introduction from someone influential than trying to talk to a mass of investors who don’t understand you (at least in the beginning).

REALITY OF AFRICA: Incubators and Accelerators popping up in Africa are helping to solve this. Accelerators like the Umbono in South Africa or Meltwater in Ghana can be a fast track to get to this step- it might take you 6 months to get to this step on your own or 3 months if your join the “right accelerator”. Be sure to evaluate them properly, the founders can have significant connections to real tech investors, others may have different intentions all together- who is the Ron Conway of Africa? The person might exist but they might not be as publicly visible as the Silicon Valley equivalent. Try get yourself into the regional pitch contest in Africa- for example Pivot East in Kenya that is organized by the iHub and sponsored by many other startup friendly organizations that provide proven regional and global visitbility.


7. BE wary of terms and make sure you have a clean cap table- but don’t overly negotiate. You are getting married but it’s one of many spouses on the long road to success. Term sheets for startups are becoming increasingly standardized across the world. Some VCs are even providing their standard ones on their website you can customize For example, passion capital in the UK (wish more African VC funds would do this!).

REALITY OF AFRICA: African investors not familiar with start-up term sheets and a country’s legal framework around concepts such as employee stock pools (setting aside shares in your company to motivate new employees with success in the company) and convertible note (a hybrid debt/equity investment instrument common in early stage start-up) might harm a start-up by demanding unreasonable terms and not ensuring the risk and reward of start-up team and investors are adequately balanced. This can kill a start-up. The big advice here is to find a lawyer that understands both sides and can educate appropriately. Do your research- the links above from sites like Quora can help you get educated fast.

Finally- remember the old investment cliche- “we invest in people not ideas”- its actually true. Treat your angel/seed investor the same.


 To read the other steps and Mamba Mentors advice click here